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United States General Accounting Office
GAO Report to the Congress
August 1999 FINANCIAL AUDIT
Capitol Preservation
Fund's Fiscal Years
1998 and 1997
Financial Statements
lei G A
Accountability * Integrity * Reliability
GAO/AIMD-99-240
= GAO _Ancountablllty * Integrity * ReliabIlIty
United States General Accounting Office Accounting and Information
Washington, D.C. 20548 Management Division
B-282548
August 16, 1999
To the President of the Senate and the
Speaker of the House of Representatives
This report presents our opinion on the financial statements of the Capitol
Preservation Fund for the fiscal years ended September 30, 1998 and 1997.
It also discusses our (1) consideration of internal controls in conducting
our audit and (2) evaluation of compliance with laws and regulations
during fiscal year 1998. We conducted our audit pursuant to 40 U.S.C.
188a-3 and in accordance with generally accepted government auditing
standards.
We are sending copies of this report to the members of the Capitol
Preservation Commission; the Honorable Alan M. Hantman, Architect of
the Capitol; the Honorable James H. Billington, Librarian of Congress; and
other interested parties.
Robert W. Gramling
Director, Corporate Audits
and Standards
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Contents
Letter 1
Opinion Letter 4
Financial Statements 8
Statements of Financial Position 8
Statements of Activities 9
Statements of Cash Flows 10
Notes to the Financial Statements 11
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&...
GAO
Accountability * Integrity * Reliability
United States General Accounting Office Accounting and Information
Washington, D.C. 20548 Management Division
B-282548
To the President of the Senate and the
Speaker of the House of Representatives
We have audited the statements of financial position of the Capitol
Preservation Fund as of September 30, 1998 and 1997, and the related
statements of activities and statements of cash flows for the fiscal years
then ended. We found
* the financial statements were fairly presented in all material respects,
* no material weaknesses in the internal controls we tested, and
* no reportable noncompliance with selected provisions of laws and
regulations we tested for the fiscal year ended September 30, 1998.
The following sections provide additional detail concerning our
conclusions and the scope of our audit.
Opinion on Financial The financial statements and accompanying notes present fairly, in all
material respects, in conformity with generally accepted accounting
Statements principles, the Capitol Preservation Fund's financial position as of
September 30, 1998 and 1997, and the results of its activities and its cash
flows for the fiscal years then ended.
Consideration of We gained an understanding of internal controls designed to
Internal Controls * safeguard assets against loss from unauthorized acquisition, use, or
disposition;
* assure the execution of transactions in accordance with management's
authority and with laws and regulations that could have a direct and
material effect on the financial statements; and
* properly record, process, and summarize transactions to permit the
preparation of reliable financial statements and to maintain
accountability over assets.
The objective of our internal control work was to determine procedures for
auditing the financial statements, not to express an opinion on internal
controls. Accordingly, we do not express such an opinion. However, for
the controls we tested, we found no material weaknesses in the system of
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B-282548
internal control and its operations for the fiscal year ended September 30,
1998. A material weakness is a reportable condition' in which the design or
operation of the internal controls does not reduce to a relatively low level
the risk that losses, noncompliance, or misstatements in amounts that
would be material in relation to the financial statements may occur and not
be detected promptly by employees in the normal course of their assigned
duties. Our internal control work would not necessarily disclose all
material weaknesses.
Compliance With Laws Our tests for compliance with selected provisions of laws and regulations
disclosed no instances of noncompliance that would be reportable under
generally accepted government auditing standards. However, the objective
of our audit was not to provide an opinion on overall compliance with laws
and regulations. Accordingly, we do not express such an opinion.
Objectives, Scope, and The Fund's management is responsible for
Methodology . preparing the Fund's annual financial statements in conformity with
generally accepted accounting principles,
· establishing and maintaining the Fund's internal controls to provide
reasonable assurance that the internal control objectives mentioned
above are met, and
· complying with applicable laws and regulations.
We are responsible for obtaining reasonable assurance about whether the
financial statements are free of material misstatements and presented
fairly, in all material respects, in conformity with generally accepted
accounting principles. Also, we are responsible for obtaining a sufficient
understanding of internal controls to plan the audit and for testing
compliance with selected provisions of laws and regulations.
In order to fulfill these responsibilities, we
'Reportable conditions involve matters coming to the auditor's attention relating to significant
deficiencies in the design or operation of internal controls that, in the auditor's judgment, could
adversely affect an entity's ability to (1) safeguard assets against loss from unauthorized acquisition,
use, or disposition, (2) ensure the execution of transactions in accordance with management's
authority and with laws and regulations, and (3) properly record, process, and summarize transactions
to permit the preparation of financial statements and to maintain accountability for assets.
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B-282548
* examined evidence supporting the amounts and disclosures in the
financial statements and notes;
* assessed the accounting principles used by management;
* evaluated the overall presentation of the financial statements;
* obtained an understanding of the internal controls related to
safeguarding assets, compliance with laws and regulations, and
financial reporting; and
* tested compliance with selected provisions of laws and regulations.
We conducted our audit from April 1, 1999, through July 9, 1999, in
accordance with generally accepted government auditing standards.
Architect of the Capitol We provided a draft of our report to the Architect of the Capitol and to the
Director of Financial Services for the Library of Congress for review and
and Library of comment. The Office of the Architect of the Capitol provides project
Congress Comments support and assistance to the Capitol Preservation Commission and the
Library of Congress provides financial management services for the Capitol
Preservation Fund, including preparing the Fund's financial statements.
The Architect and the Director agreed with the contents of our report.
We appreciate the cooperation and assistance the Architect of the Capitol
and the Library of Congress management and staff provided during our
audit of the Capitol Preservation Fund's fiscal years 1998 and 1997 financial
statements. If you have any questions regarding this report, please contact
me or John J. Reilly at (202) 512-9406. Key contributors to this assignment
were Patricia Blumenthal, Patricia Summers, and Greg Ziombra.
Robert W. Gramling
Director, Corporate Audits
and Standards
July 9, 1999
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Financial Statements
Statements of Financial Position
CAPITOL PRESERVATION FUND
STATEMENTS OF FINANCIAL POSITION
as of September 30
1998 1997
Assets
Cash $ 13,010 $ 23,148
Investments, net (note 3) 26,358,601 25,019,755
Accrued interest receivable on investments 283.875 264.635
Total assets $26.5.i86 $25aZ0753
Liabilities and Net Assets
Total liabilities 0 0
Net Assets
Unrestricted net assets $26.fi 46 $25,307.538
Total net assets $26fi55486 $25.3075
38
Total Liabilities and Net Assets $6 $25.07538
The accompanying notes are an integral part of these financial statements.
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Financial Statements
Statements of Activities
CAPITOL PRESERVATION FUND
STATEMENTS OF ACTIVITIES
for the Fiscal Years Ended September 30
1998 1997
Changes in Unrestricted Net Assets
Operating Revenues
Interest (note 4) $ 1,350,848 $ 1,297,350
Total operating revenues $ 1,350,848 $ 1,297,350
Operating Expenses
Publications 2.900 0
Total operating expenses $ 2,900 $ 0
Increase in unrestricted net assets $ 1,347,948 $ 1,297,350
Increase in Net Assets $ 1,347,948 $ 1,297,350
Net Assets at Beginning of Year $25.307.538 $24.010.188
Net Assets at Year-End $26655.486 $25307.538
The accompanying notes are an integral part of these financial statements.
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Financial Statements
Statements of Cash Flows
CAPITOL PRESERVATION FUND
STATEMENTS OF CASH FLOWS
for the Fiscal Years Ended September 30
1998 1997
Cash Flows From Operating Activities
Interest received $1,331,608 $1,349,083
Coin surcharge received 0 12,145
Cash paid for expenses (2.900) 0
Net cash provided from operating activities $1,328,708 $1,361,228
Cash Flows From Investing Activities
Purchases of Treasury securities $(53,997,219) $(53,027,936)
Maturities of Treasury securities 52.658.373 51.670.917
Net cash provided from investing activities $ (1,338,846) $ (1,357,019)
Net (Decrease) Increase in Cash $(10,138) $ 4,209
Cash at beginning of year 23.148 18.939
Cash at end of year $ 13.1 $2
Reconciliation of Changes in Net Assets to
Net Cash From Operating Activities
Changes in Net Assets $1,347,948 $1,297,350
Adjustments to reconcile changes in net assets to
net cash provided from operating activities
Decrease in accounts receivable - surcharges 0 12,145
Decrease (increase) in accrued interest (19.240) 51.733
Total Adjustments (19,240) 63,878
Net Cash From Operating Activities $1.328708i $
The accompanying notes are an integral part of these financial statements.
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Financial Statements
Notes to the Financial Statements
CAPITOL PRESERVATION FUND
NOTES TO THE FINANCIAL STATEMENTS
Note 1. Description of Entity
The Capitol Preservation Commission (the Commission) was established under Title Vil of Public
Law 100-696 in November 1988 for the purpose of providing for improvements in, preservation of,
and acquisitions for the United States Capitol and providing works of fine art and other property for
display in the United States Capitol and other locations under the control of the Congress.
To finance improvement, preservation, and acquisition activities of the Commission, Title VIII of
Public Law 100-696 established the Capitol Preservation Fund (the Fund) within the U.S.
Treasury. The Fund consists of assets provided through deposits of charitable contributions,
surcharges received by the Secretary of the Treasury from the sale of coins under the Bicentennial
of the United States Congress Commemorative Coin Act and the Bicentennial of the United States
Capitol Commemorative Coin Act, and interest on the invested portions of the Fund's assets.
Fund assets not required to finance current improvement, preservation, and acquisition activities
are invested in interest-bearing obligations of the United States.
In accordance with its rules, the Commission may fund or assist in the funding of improvements to
the Capitol Building and surrounding grounds if such improvements are authorized, undertaken,
and completed under the procedures established by the Congress for such purposes. With
respect to works of fine art and other property for display, the Commission is authorized to expend
$400,000 ($200,000 for the House of Representatives and $200,000 for the Senate) for the
purchase of art, furnishings, or items of historical interest provided that such expenses are
approved by a majority of the members of the Commission from the House of Congress for which
such purchases are made. However, the Commission may not maintain any collection of fine or
decorative art, or other property, but may assist in the transfer of such items to a congressional
entity (such as the Senate Commission on Art, the House Fine Arts Board, or the Joint Committee
on the Library) or facilitate the disposal of items.
The Architect of the Capitol, the Senate Commission on Art, and the House of Representatives
Fine Arts Board are required by Public Law 100-696 (1988) to provide staff support and assistance
to the Commission. As necessary, the Architect of the Capitol awards contracts and procures
goods and services to complete projects established by the Commission, and ensures that goods
and services purchased from vendors are received. Similarly, the Library of Congress, pursuant to
Public Law 101-45 (1989), is required to provide financial management services for the
Commission. These services include coordinating activities with the Department of the Treasury
for the deposit, disbursement, investment, and management of the Capitol Preservation Fund. In
addition to these congressional entities, the Secretary of the Senate and the Clerk of the House of
Representatives, pursuant to Commission Rules, provide additional support and assistance.
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Financial Statements
NQte 2. Summary of Significant Accounting Policies
The Fund's financial statements have been prepared in accordance with generally accepted
accounting principles and reflect--on an accrual basis--the receipt and use of the Fund's assets to
finance the Commission's improvement, preservation, and acquisition activities.
Effective for fiscal year 1996, the Fund's financial statements became subject to accounting and
disclosure requirements applicable to not-for-profit organizations--specifically Statements of
Financial Accounting Standards Nos. 116, 117, and 124. These requirements include accounting
and disclosure guidelines for investments, contributions received and made, and the form and
content of financial statements. However, these requirements have had only limited impact on the
Fund's financial statements because (1) the Fund received no contributions during fiscal years
1998 and 1997 and no prior year contributions contained outstanding restrictions, (2) the Fund's
assets are unrestricted, and (3) the Fund's investments are invested in relatively short-term (3-
and 6-month) interest-bearing Treasury obligations.
The Architect of the Capitol, the Library of Congress, and other congressional entities are required
by law to provide support services to the Commission. The cost of these services are, by their
nature, indirect, difficult to quantify, and financed with appropriated funds of the other entities. To
the extent that these services are provided, they are not considered operating expenses of the
Fund.
Once approved and funded by the Commission, the improvements, preservation, and acquisitions
are transferred to the Architect of the Capitol and/or other congressional entities. Through their
transfer, these assets become the accounting responsibility of other congressional entities and are
not considered assets of the Fund.
Note 3. Investments. Net
Deposits to the Fund from contributions, coin surcharges, and interest on invested funds that are
not needed currently to finance improvement, preservation, and acquisition activities are invested
in interest-bearing obligations of the United States, which are purchased from the U. S. Treasury
at a discount. The Commission has directed the Library of Congress to invest funds derived from
contributions in 3-month Treasury securities and funds derived from coin surcharges in 6-month
Treasury securities. The values of investments outstanding as of September 30, 1998 and 1997,
net of discounts were $26,358,601 and $25,019,755, respectively. Annual effective yield ranged
from 4.58 percent to 5.46 percent in fiscal year 1998, and from 4.78 percent to 5.39 percent in
fiscal year 1997.
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Financial Statements
Outstanding Investments as of September 30
1998 1997
Face value of investments $26,999,000 $25,665,000
Less: discounts (640.399) (645,245)
Investments, Net of Discounts $26358601 $25019.755
Note 4. Revenues
Earned revenues during fiscal year 1998 of $1,350,848 consisted only of interest on United States
Treasury obligations. During fiscal year 1997, earned revenue consisted of $1,297,350 in interest
on Treasury obligations.
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